Today the Office for National Statistics have released their preliminary estimates for UK gross domestic product.
Slightly exceeding the expectation, GDP grew by 0.4% compared to the second quarter of 2017. In line with expectations, the growth compared to a year ago was equal to 1.5%.
Not just services, the manufacturing sector is doing fine
This is the first release (the second and the third are scheduled for November and December) so only few new figures are available, however some considerations are still possible.
The economy overall is still expanding with some welcomed surprises.
The service sector, which accounts for almost 80% of the total economy, performed a little bit better than expected and grew by 0.4% compared to the previous quarter.
The manufacturing sector, after a slow start of the year, is performing well in particular thanks to vigorous growth in car production. The manufacturing sector overall expanded by 1% over the quarter and by 2.7% compared to the previous year.
Not following the same path
The ONS is the first statistical office amongst the G7 countries to release a third quarter GDP estimate so a proper comparison is not possible. However this last release seems to confirm that the UK economy is trending on an opposite direction compared to the other G7 countries. Advanced economies look to be on the other side of the hill with hefty growth rates and high business and consumer confidence.
Despite the fact of being the second fastest economy for the last two years and the top one in 2013, the UK is set to be one of the worst three G7 countries for GDP growth in 2017 (source: IMF World Economic Outlook October 2017). However this latest release should mean the UK avoids being in the last position (Japan and Italy are the two candidates).
Brexit, soaring inflation and lack of investments
Uncertainties over Brexit and its slow process, inflation and sterling devaluation are clearly a drag on the economy. These uncertainties have also been confirmed to be an obstacle to future investments in our latest Investment Monitor.
Business investment has also been weak in the past few years and even if the labour market still looks healthy, productivity is not picking up as a direct consequence of the sluggish investment growth.
Hawks are coming
On 2nd November, the Bank of England will decide whether or not to raise its Bank Rate. The decision that looked to be set in stone a month ago wavered in the last week due to weak figures for retail sales and some comments from Bank’s members. This slightly stronger than expected GDP figures have probably put an end to the discussion – the BoE is ready for the first Bank rate increase in 10 years.